Changes to the 2021 Child Tax Credit to Help Families Get Advance Payments

Starting July 15, many families will begin receiving advance payments of their 2021 Child Tax Credit.

Signed into law in March as a part of the American Rescue Plan, the expanded Child Tax Credit provides financial help for families with children under the age of 18.

• The maximum credit for children under the age of 6 = $3,600
• The maximum credit for those between the ages of 6 and 17 = $3,000

In order to receive the full amount of the Child Tax Credit, you must also have an adjusted gross income of less than $150,000 if you are married filing jointly, $112,500 if you are filing as head of household, and $75,000 if you are filing single. If you receive more than what is listed in your filing threshold, you may be eligible to receive $2,000 per child. However, if you make over $400,000 filing jointly, or $200,000 in any other filing statuses, your child tax credit will be reduced by $50 for every $1,000 over the threshold.

This summer, the IRS will distribute 50% of the maximum credit through monthly payments as an advance on your 2021 taxes. Households receiving the full benefit can expect payments of $300/month for children under the age of 6 and $250 for those between the ages of 6 and 17. The IRS will use the information you provided in your 2019 or 2020 tax returns to determine if you qualify and will automatically enroll you for advance payments.

To qualify for advance Child Tax Credit payments, you — and your spouse, if you filed a joint return — must have:

• Filed a 2019 or 2020 tax return and claimed the Child Tax Credit on the return; or
• Given the IRS your information in 2020 to receive the Economic Impact Payment using the Non-Filers; and
• A main home in the United States for more than half the year (the 50 states and the District of Columbia) or file a joint return with a spouse who has a main home in the United States for more than half the year; and
• A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number; and
• Made less than certain income limits.

The payments will be sent out July through December, with the majority being delivered via direct deposit. If the IRS does not have your direct deposit information, you will receive a paper check in the mail. You will need to claim the remaining 50% of the credit on your 2021 income tax return.

Example:  On their 2020 return, the Smith’s received CTC of $8,000.  Starting on 7/15, they will get monthly checks or direct deposit, in the amount of $8,000 ÷ 2 (50% of the maximum credit) ÷ 6 months = $666.67 per month.  Then when they file their 2021 return, they will get the remaining $4,000 credit.

Taxpayers will have the ability to opt-out of the advance payments and instead claim the full credit on their 2021 income tax return. Consult your tax advisor on how taking the advance payments might impact your tax situation. There may be valid reasons why you might want to opt out.

FAQs

What if I don't want to receive advance Child Tax Credit payments?
If you prefer not to receive monthly advance Child Tax Credit payments because you would rather claim the full credit when you file your 2021 tax return, or you know you will not be eligible for the Child Tax Credit for your 2021 tax year, you will be able to unenroll through the Child Tax Credit Update Portal (CTC UP).

Are the advance Child Tax Credit payments taxable?
No. However, if you receive more than the full amount you are eligible to claim, you may have to repay the excess amount on your 2021 tax return.

Can I update my bank account information for the advance Child Tax Credit payments?
Yes. The IRS will provide a Child Tax Credit Update Portal on irs.gov where you will be able to update your information.

If I’m eligible to receive the advance Child Tax Credit payments, when will I be receiving them?
The payments will be disbursed in monthly installments starting July 15, 2021 and end in December 2021.

To learn more about the Child Tax Credit, visit irs.gov.